tv Nightly Business Report PBS December 27, 2012 6:30pm-7:00pm PST
>> this is n.b.r. >> susie: good evening. i'm susie gharib. tom hudson will be along a little later in the program. a positive turn in the fiscal cliff crisis. house republicans agree to meet sunday night to resume talks after a day of finger-pointing and complaining in washington. on wall street, fiscal fears created whiplash for investors: a big stock market sell-off and then bounce back on word that lawmakers are springing back into action. and, if you used your smartphone to shop this christmas, you're in fashion. it was the year's top retail trend. we have that and more tonight on "n.b.r."! a dramatic cliff-hanger today between washington and wall street about the fiscal cliff.
stocks initially sold off after senate majority leader harry reid predicted the economy would go over the cliff. speaking from the senate floor he said there's not enough time between now and the end of the year to reach a deal. but stocks erased their losses in the final hour of trading on news that the house of representatives will reconvene on sunday night to resume talks. by the closing bell, the dow was down only 18 points, bouncing back from a triple digit loss, the nasdaq lost four, and the s&p slipped almost two points. so what happens next? and can lawmakers prevent an economic crisis by agreeing on a fiscal cliff deal? darren gersh reports. >> reporter: here is a measure of how bad things are now in washington. markets rallied on news the house will come back to work on sunday, even though there is no solution ready for lawmakers when they return. and in the senate, which is back at work, republican leader mitch mcconnell warned he would not write a blank check to the white house, though he said he would keep an open mind on anything the president proposes. >> it appears to me the action,
if there is any, is now in the senate side and we'll just have to see if we're able, on a bipartisan basis to move forward. >> reporter: senate majority leader harry reid said he too would try to reach agreement. but that was after spending most of the day hammering away at house republicans. reid blamed the current stand off on the inability of house republicans to pass their own plan which would have extended tax breaks for everyone making less than a million dollars a year. >> it's the mother of all debacles. that was brought up in an effort to send us something. he couldn't even pass it among the republicans it was so absurd. he meaning the speaker. so it's very clear now mr. president that the speaker's number one goal is to get elected speaker on january 3. >> reporter: january 3 is the deadline for the new congress to start work. if a fiscal cliff fix isn't passed by then, the start of a new congress will likely delay matters even more. which is why the focus now is on
reaching a nano-deal. >> the minimal that they can put together to avoid the fiscal cliff which will have sadly almost no impact on the long- term debt trajectory, but right now, neither markets nor the congress care about that. >> reporter: congress has never been terrific at long-range planning, but now the definition of long range seems to be 48 hours. >> you don't hear people talking, well a year from now, we really need to be here. you hear, well we need to do that this week. we need to do that day after tomorrow. this short-time frame horizon is new and i think people who think we are going to have tax reform and entitlement reform next year are way, way off base. >> cutting short his vacation but it's unclear whether he has the power to force a last minute solution through a deeply divided congress. >> darren gersh.
>> so, joe, how bad could that be? >> i had, susie. unfortunately, the economy has been gaining momentum, if you look at the labor market as well as housing making progress. but if we would see a fall from the fiscal cliff, it's not in our own estimates that those in the congressional budget office would be enough to impart a recession in the first half of 2013. i think still there's a 51% chance, if you ask me, that we avert the cliff but those are uncomfortablably low chances of success. >> we have seen some progress in the economy, in the housing sector, in the auto sector, in the job market. if we do go over the cliff, what happens to the progress that has been made in those sectors? and consumer spending spending d confidence as well? >> well, what i would most likely anticipate that would
face the brunt of the cliff would be the investment, that has always been a volatile and up and down section and we would see that in business and companies forestalling investment, cutting potentially jobs in some sectors and that we have what has been a modest, virtuous cycle turn into a modest vicious one in the first half of 2013 and consumer spending would fall as well and we would see disappointing consumer confidence numbers even today. >> i don't know if you saw this oped piece that an official wrote in the "the wall street journal" saying if we go over the fiscal cliff he sees unemployment, the unemployment rate getting up to 11%. does that number make sense to you right? right now we're at a little above 7, almost 8%. >> that seems a little pessimistic in my mind but even if we're talking about nine or 10 percent unemployment given we have seen modest progress to date it would be unfortunate
conversation and clearly sub optimal from the u.s. economic perspective. so when unemployment starts to rise, it tends to be persistent and gain momentum and we want to try to avoid that at almost any cost so this is something that, even if we hit 9%, they would clearly be recessionary if we were talking about than the six months from now. >> and what about the economic status of the u.s.? in the world? there's been a lot of talk about a downgrade of the u.s.' credit rating. do you see that happening? and what would that mean? >> well, it clear has has happened in the past from s and p and it could very happen through moody's. i think it's symbolic of the long-term structural imbalances that we need to address clearly as a nation. we are still however, susie, as clearly, you and i know, still the locomotive engine of the world despite china and other emerging rising markets and that has been clear the past two
years, where europe is in recession, japan continues to languish and yet the u.s. economy has shown resiliency but it is not immune from fiscal shock and that's something i clearly continue to monitor. >> all right, joe, thank you very much for coming on the practical. have we have good news for the in you year. thank you very much. >> you as well. thank you. >> joe davis, chief economist at ativan guard group >> susie: still ahead, the top tech trends for 2013, or how your cell phone will become an even bigger part of your life in the new year. >> susie: a lot of mixed messages for investors today. joining us now to sort through it all, ann miletti, senior portfolio manager at wells fargo advantage funds. >> so, anne, what do you think you heard, the economist talking about a mild recession. are we in for a correction in the stock market if that happens? >> i think right now the market is trying to predict how long
this uncertainty is going to last. so right now, you know, because the market is a measuring tool, it's measuring how long the uncertainty with the fiscal cliff will last. if it's short and we get a resolution, i think we will avoid a recession. if it takes months to figure out, then i think in a slow-growth economy we could get into recession territory pretty easily without some certainty. >> but as you know, we're going to be -- even if we get a deal, we will be hearing reports on quarterly earnings in the next couple of weeks. we will be hearing from c.e.o.'s that will be talking about their out look and with all of the uncertainty probably we will be getting a lot of gloomy news. they can't be helping investor confidence, right? >> right. that's true. if we don't have some certainty on the fiscal cliff, if we don't have resolution to that, i think you're right. in that c.e.o.'s probably will remain fairly conservative in their out look and that probably won't be good for the market. but if we do get resolution, i
think c.e.o.'s by nature tend to be optimistic people, and if there's some resolution and they know what the rules of engagement are, they're going to go out and probably be a little bit more optimistic. >> so you have been saying that you changed your investment strategy a little bit nor your clients and you're looking for stocks that grow better than the gdp. do you have a couple you want to tell us about? let's look at the stock markets, bv and t, and the itg, what is it about these stocks that you think are good in this uncertain time? >> well, i think both companies are set up to deliver better than acknowledge results, better than g.d.p. growth for the new year. ipg is an advertising agency. they lost a little bit of business in 2012. we think that they're going to gain new business in 2013. their leverage and ratios are way down and the management has committed to both growing
revenues and returning more cash to shareholders and i think that will be a positive for 2013. bb and t has been affected by low interest rates so if we have any change in interest rates, this very high quality bank will out perform as well! all right. we will have to leave it there. anne, thanks so much. do you own any of these stocks that you just mentioned? >> i own the mutual funds that i manage, the common stock opportunity fund, as well as advantage funds. and i don't own the stocks directly, no. >> good to know. thank you very much anne miletti.
>> susie: the fiscal cliff isn't the only deadline threatening the u.s. economy. dockworkers at some of the nation's biggest ports could walk off the job this weekend, if a new labor deal isn't reached. as allison worrell reports, a strike could ripple far beyond the ports. >> reporter: if a deal isn't reached by 12:01 a.m. sunday, union dock-workers will take to the picket-line. 15 ports span the east and gulf coasts. and while they're in different locations, handling different types of cargo, they all agree, a strike would be very bad for business. >> it's really important for the people in our country to recognize, in this state, that a strike combined with the ongoing negotiations between congress and president obama regarding, um, the so-called fiscal cliff could be a one, two combination knock out for nation's economy.
>> if a strike does happen that means a big chunk of the more than 14,000 members of the international longshoresmen association will be off the job. >> reporter: the ports impacted generate an estimated $11 billion in state and local taxes annually. but losses from any strike will be felt far beyond the coast, with industries as diverse as agriculture, manufacturing and retail taking a hit. that's got the national retail federation urging president obama to intervene: >> the ports are a critical component to the u.s. global supply chain and a potential strike or shutdown to the ports not only impacts retailers but all other businesses who rely on the ports to move the nation's commerce. >> reporter: the sticking point in negotiations: a decades old law, called the container royalty fund. it was established in the 1960s to help dockworkers displaced by technology, the port alliance says these days those royalties serve as a bonus to workers, not a safety net. but the union disagrees saying the payments still help
compensate workers for lost job opportunities. florida is home to almost a third of the ports that would be affected by the potential strike, governor rick scott says he's still thinks a deal will be reached, but if it doesn't he's counting on washington to step in. allison worrell, "n.b.r.," fort lauderdale, florida. >> susie: volatility was the word of the day here on wall street. investors were fixated on the war of words in washington over the fiscal cliff, and shrugged off some encouraging news today about jobs.
fewer americans filed for jobless benefits last week: new claims fell 12,000 to 350,000. but the labor department says the christmas holiday may have distorted the numbers, as some state offices were closed monday and tuesday and could not provide data. in the markets, the volatility index, or what's often called the "fear index," jumped to its highest level since last summer on those fiscal cliff worries. but trading was still light volume on the big board weighed in at 565 million shares. over on the nasdaq: over 1.3 billion shares traded hands. eight out of 10 sectors in the s&p were down. the weakest were materials and financials. tech stocks also lost ground. the declines punished large-cap tech stocks across the board, especially those believed to be more exposed to federal spending. cisco systems and oracle each fell at least 1%. while hewlett-packard, dell and netapp settled fractionally lower. on the consumer front, amazon says it had its biggest holiday season ever, selling more than 26 million items on its peak day.
the kindle fire h.d. tablet was the best-selling single product of the season. but amazon still ended down $0.32 to $248. apple stock rose more than $2 on bargain hunting. as you can the see, the stock has been hard in the last few months but is still up 26% this year. separately, apple said c.e.o. tim cook's paycheck was skimpier this year. he took home $4.2 million, much less than last year's $70 million. for more on executive compensation, head to: www.nbr.com, our "n.b.r.-u" partners at wharton have research on why companies feel they need to pay big bucks for top talent. wal-mart could be in trouble in india. the indian government looking into whether wal-mart's lobbying activities in the u.s. violated indian laws. shares of wal-mart closed fractionally higher. smith and wesson is buying back an additional $15 million worth of stock, on top of the $20 million repurchase program it recently completed.
smith and wesson's shares have fallen nearly 10% since the newtown connecticut shootings. investors bought up gold today, as a safe place to park money while washington lawmakers spar over the fiscal cliff. the precious metal settled $3 higher at $1,663 an ounce. gold prices are on pace for an annual rise of about 6%, the smallest annual gain since 2008. and, supply concerns pushed palladium prices to a nine-month high. investors are worried that tight supplies from the world's top two producers and steady demand from the auto sector could mean higher prices in 2013. it settled at $708 an ounce: over the past year the metal has rising about 7.5%. and finally, for the second day in row the ishares emerging market e.t.f. ended higher. and that's tonight's "market focus."
>> susie: once upon a time, holiday shopping meant countless trips to the mall. but this year, more and more people purchased their gifts using smartphones and tablets. erika miller takes a closer at how mobile technology is transforming retail. >> reporter: holiday shopping used to mean walking from store to store, and waiting on long lines. but nowadays, many people are only to happy to let their fingers do the work. >> i think mobile technology and mobile commerce is really becoming the standout stars of this holiday season. >> reporter: most adults used at least one online retail site for their holiday shopping. less than half of adults bothered to shop in a bricks and mortar store. >> one-third of ebay's shoppers now use smartphones and tablets to buy or research items.
wal-mart expects mobile to account for 40% of online holiday traffic this year. which is why that retailer and others have started offering special promotions exclusively for mobile shoppers. the growing popularity of mobile shopping is bad news for many bricks and mortar stores selling goods that are available online for less. nearly half all adults admit to showrooming. that's the industry term for going to a store to check out a product in person. but then buying the item online, often from a mobile device while still in the store. best buy is ranked as the top store where people showroom, followed by wal-mart, target, and home depot. the growth in mobile commerce this season also spells trouble for stores that have websites that are not optimized for mobile shoppers. >> i think that if you don't have that presence right now its' going to be very difficult to get one long term and it's probably time to wake up and embrace the technology >> reporter: growth in mobile commerce is sure to continue long past the holiday season. some experts predict mobile
spending will top a trillion dollars within five years. erika miller, "n.b.r.," new york. >> susie: using your phone for shopping, is just one of the ways you will use your cell phone in the coming year. as processing power gets bigger and the physical size gets smaller, companies are using that mobile technology to make products you use every day smarter as well. as ruben ramirez reports, those are two of the top tech trends we'll see in 2013. >> reporter: people use smartphones to play games, watch movies and keep up with social media, but for many the mobile phone will become a bigger part of their lives in the coming year. trendwatchers call it the mobile fingerprint or a smartphone as unique as your fingerprint. no need to type in passwords, your phone tells your computer its you, and then locks the screen when you step away. on the health front there's technology to let a smartphone help diabetics measure their glucose levels. and with retailers, going mobile
means more than processing payments. >> we do something very specific which is not just focus on the mechanics of payments but the experience around it. everything from the point of sale all the way to what's in the consumers pocket and that bridge between the two is what is powerful and what is meaningful. >> reporter: telecom companies see mobile opportunities as well verizon, at&t and t-mobile are testing a service called isis. it brings together a users loyalty cards, coupons and boarding passes. ann mack is the director of trendspotting at j.w.t. her team puts together the top 10 trends list for 2013. >> many of our trends reflect how brands are leveraging, driving or counteracting technologies' omnipresence in our lives and how consumers are responding to its ever-present pull. >> reporter: 60% of americans already consider the relationship with their smart phones on the same level as a trusted confidant.
over the coming year, technology will also continue to seep into objects we use everyday, take these ski goggles for example. they are what's being dubbed: intelligent objects. >> there's an absolute wow factor in the goggles because a lot of people perceive that the images are projected into the lens of the goggle on the inside but its really a screen at the bottom right corner and the screen, it looks like you're looking at a 14 inch screen from five feet away. >> reporter: from clothes designed to keep your body warm in winter, to the most highly anticipated launch of 2012, google glasses. i.m.s. research associates estimates the global market for wearable wireless devices will hit $6 billion by 2016. but a word of caution... >> just because you can embed technology just because you are able to it doesn't necessarily mean you should. you have to ensure that it truly enhances the experience.
>> reporter: it looks like oakley's goggles, at least initially, are doing just that. >> there's very wealthy people coming in to get these goggles to go on a ski or snowboard trip and there's also people scraping up their last $600 to come in and get them. >> reporter: perhaps a sign that if you build it, they will come. ruben ramirez, "n.b.r.," new york. >> susie: tomorrow, ruben takes a look at the top trend for companies next year. here's one clue: it could get your creative juices flowing. also tomorrow, our friday market monitor guest says the theme for stock investors in the new year is cuba. tom herzfeld gives the names of three stocks that could soar when the embargo is lifted. he's president of thomas j. herzfeld advisors. tonight, we continue our look at the worst c.e.o.'s in 2012 with a couple of top executives who almost made the list. tom hudson talks with sydney finkelstein of the tuck school of business at dartmouth. >> sydney finkelstein is with
the tuft school of business at dartmouth, with us again from new york. we spoke last time about your four worst c.e.o.'s. you had two more that were really seen at visionaries but really brought down-to-earth this year. they almost made your list of bad c.e.o.'s. the first is well-known mark zuckerberg, c.e.o. of facebook. the company seems to be trying to get its legs under it now that it is maturing a little bit here. >> what worried me about mark zuckerberg and why he almost got on the list is he has created a little dictatorship as facebook, even though he only owns now a small percentage of the company because the jewel's stock structure and the way he controlled the board of directors he will be a tough guy to get rid of if something does go wrong. so classic traditional and valuable, corporate governance measurements have been thrown out of the door. at the same time i think zuckerberg has been very slow in
addressing the rise of mobile has a way in which so much of the internet has gone. so many people are doing so much on their iphones and smart phones and so on and there's been a great push in the last half year to mobile. there's more and more effort going in that direction so i think he is trying to do what needs to be done. i have a lot of concerns about his management style, his maturity as a leader and someone running a company of this size and this importance now, is he really the right person. i think he is someone to watch out for 2013. >> i have to think those are the same concerns for you have for your second almost worst c.e.o. andrew mason of daily deal site groupon. a lot of european problems there but there were significant accounting problems and questions about mr. mason's maturity. stock price down significantly from where it was a year ago. >> grew upon has collapsed in 2012 and stock down 80% over the year. andrew mason look like a c.e.o.
in over his head: you mentioned various problems in europe. and you know, fundamentally there's not any sustainable strategy behind the groupon approach and that's because you have living social and literally dozennens and other companies doing these daily deals, and so if you don't have any particular advantage other than being first and now being eclipsed you have to come up with something else and there's a potential saving grace because mason has been working around-the-clock to try to figure out what could we do at groupon to try to stem the tide and there's a variety of different efforts and experiments frankly that are going on. so what i like about that is that he is recognizing the real fundamental problem. he has not been able to fix it's yet but he is going all in and trying to and for that reason he is not on the list this year but let's watch him for next year. >> maybe he could avoid the list all together next year if he is able to hit a home run. sydney finkelstein with dartmouth.
>> >> susie: that's "nightly business report" for thursday, december 27. have a great evening everyone. we'll see you online at: www.nbr.com and back here tomorrow night. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org >> join us anytime at nbr.com. there, you'll find full episodes of the program, complete show transcripts and all the market stats. also follows us on our facebook page at bizrpt. and on twitter @bizrpt.